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The specialized consulting firm Befranquicia explains the keys for companies that want to franchise their hospitality business model
MADRID, February 21, 2024.- Franchising a hospitality business can be a very effective growth strategy for several key reasons. This option not only allows business owners to expand their brand and reach new markets with a low initial investment, but also offers benefits for both the franchisor and franchisee. The consulting firm BeFranquicia presents several reasons to consider franchising as a good expansion option for any hospitality business:1. Accelerated Brand Expansion Franchising allows hospitality business owners to expand their brand more quickly than would typically be possible through organic growth methods. By utilizing franchisees' capital and resources, franchisors can open new stores in multiple locations without assuming all of the financial and operational risk themselves.2. Reduced Financial Risk Expansion through franchising significantly reduces financial risk for the franchisor. Franchisees are typically responsible for the initial investment, including the cost of site development, the purchase of equipment, and the working capital needed to start the business. This means that the franchisor can grow without committing so much of its own capital or resorting to external financing.3. Diversified Revenue Stream In addition to revenue generated from their own operations, franchisors earn revenue through franchise fees, royalties based on percentage of sales, and possibly the sale of supplies and services to franchisees. This creates a diversified income stream that can make the overall business more resilient to market fluctuations.4. Motivation and Site Management Franchisees, as owners of their establishments, are inherently motivated to maximize the performance and profitability of their operations. This can lead to more effective management and higher quality customer service compared to directly managed branches, where managers are employees and have no direct involvement in the success of the business.5. Geographic Expansion and Local Market Knowledge Franchising allows hospitality businesses to expand into new geographic markets with the advantage of franchisees' local knowledge. These can adapt the service offering to local preferences and needs, thus increasing the chances of success in different regions.6. Take Advantage of Economies of Scale As the franchise network grows, both the franchisor and franchisees can benefit from economies of scale in purchasing supplies, marketing, and advertising. This can improve profit margins and market competitiveness. Ultimately, franchising a hospitality business offers an attractive route for expansion, allowing business owners to grow their brand and reach new markets with reduced investment and risk. However, it is crucial to develop a solid franchise model, provide adequate support to franchisees, and maintain rigorous quality control to ensure the long-term success of the franchise.
Contact Contact name: Alvaro Sánchez Contact description: BeFranchise Contact phone: 91 297 82 38
